He was hit while batting and retired hurt on 18 and his side were subsequently bowled out for 275 replying to South Africa's 474 for nine declared.
"An x-ray confirmed that Ross Taylor has a fracture of the ulna bone of his left forearm," New Zealand's medical director, Ian Murphy, said in a statement.
"The break is not displaced which is a positive sign but we will see orthopaedic surgeon to determine the best course of action and length of time out of the game."
Taylor is 'unlikely' to play any further part in the match. South Africa go into the final day 274 runs ahead having closed on 75 without loss in their second innings.
It is a desperate blow for the skipper after he missed the limited overs series against the touring South Africans following a calf injury picked up against Zimbabwe earlier in the summer.
© Cricket World 2012
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